In October, Division Two of the Washington Court of Appeals held that a UIM insurer cannot be compelled to disclose attorney-client privileged and work-product documents generated after a claimant has filed a bad-faith suit. Richardson v. Gov’t Employees Ins. Co., 200 Wn. App. 705, 403 P.3d 115 (2017). In so holding, the court placed an important bright-line limit on the discovery allowed in UIM bad-faith suits under Cedell v. Farmers Ins. Co. of Washington, 176 Wn.2d 686, 295 P.3d 239 (2013).

The case arose from a 2010 accident in which GEICO’s insured, Christine Richardson, suffered multiple injuries. The at-fault driver’s insurer paid Richardson its policy limits of $25,000. GEICO initially denied Richardson’s PIP claim in part, but later paid its limits after an arbitration. It denied her UIM claim because it believed that she had been fully compensated for her injuries. In 2013, Richardson sued GEICO in Kitsap County Superior Court for bad-faith handling of both her PIP and UIM claims.

In discovery, Richardson sought all of GEICO’s privileged materials. The trial court ordered GEICO to produce the privileged portions of its claim file because Richardson had shown, after an in camera review, that a reasonable person would believe that GEICO had acted in bad faith. Richardson later sought to depose GEICO’s defense attorney and to subpoena the file that the attorney had generated during litigation. When GEICO objected, Richardson filed a series of motions to compel. Granting the last of those motions in part, the trial court ruled that Richardson could pursue discovery into privileged documents concerning GEICO’s alleged bad-faith conduct in the litigation, such as its refusal to settle.

The Court of Appeals accepted discretionary review of the order regarding litigation documents and reversed. At issue was the scope of discovery permitted by the Supreme Court’s landmark ruling in Cedell. In that decision, the Court held that an insured may pierce the privilege between a UIM insurer and its attorney by showing that the insurer had engaged in civil fraud, which may include acting in bad faith in an attempt to defeat a valid claim.

Richardson held that while Cedell permitted discovery into certain pre-litigation communications where a claimant has made a showing of civil fraud, its holding was limited to pre-litigation documents. The Court gave three reasons discovery should not be allowed into post-litigation communications. First, the litigation file was not relevant to Richardson’s claims because the litigation concerned GEICO’s denial of her claim long before she filed suit; GEICO’s conduct during litigation had no bearing on its bad faith handling of her claims. Second, Richardson cited no analogous case law to support her position. The non-Washington cases she did cite involved either non-UIM claims or bad faith statutes broader than Washington’s. Finally, public policy favored upholding the privilege. Permitting discovery into attorney-client communications during litigation would discourage UIM insurers from defending questionable claims. UIM claimants also have other remedies for bad-faith conduct in litigation, such as sanctions.

Richardson is a helpful reminder that Cedell’s influence over discovery in the UIM context is quite limited.

This entry was posted
on Thursday, December 7th, 2017 at 10:33 pm and is filed under Insurance Commando.